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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

Kestrel Holdings Inc., incorporated abroad, has 60% of its paid-up capital (equity and preference together) held by Indian companies and Indian citizens. It carries on business in India. What is the consequence under the Companies Act, 2013?

Because Indian citizens and Indian bodies corporate together hold at least fifty percent of its paid-up capital, the company must comply with the foreign companies Chapter and other prescribed provisions for its Indian business as if it were an Indian company, under Section 379(2).

  1. AIt must comply with the Chapter on foreign companies and such other prescribed provisions for its Indian business as if it were an Indian companyCorrect
  2. BIt is exempt from all provisions because it is incorporated outside India
  3. CIt must comply with the Act only if Indian holders own 100% of its capital
  4. DIt need only comply with the Act if its Indian holders are all individual citizens

Explanation

Section 379(2) applies where not less than 50% of paid-up capital, equity or preference, is held by Indian citizens and/or Indian-incorporated bodies, singly or in aggregate. At 60% the test is met, so the company must comply as if Indian for its Indian business. The 100% and individuals-only options add conditions the section does not contain.

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